1. Introduction
On 10 December 2020, Japan’s ruling coalition parties (the Liberal Democratic Party and Komei Party) has revealed the “2021 Tax Reform Outline,” which was approved by the Cabinet on December 21, 2020. In this News, we will mention the corporate taxation in the 2021tax reform.
Please note that the tax reform outline could be changed in the process of the upcoming deliberation in the Diet.
2. Corporate taxation
・ New tax incentive for digital transformation investment
As a new tax incentive, either special depreciation of 30% or a tax credit of 3% of the acquisition cost will be available for the investment on cloud-based systems and other related implementation introduced in accordance with a "business adaptation plan (tentative name)” under the revised Industrialized Competitiveness Enhancement Act (the revised ICE ACT).
・ New tax incentive for carbon neutral investment
For achieving the high target of Japan’s 2050 Carbon Neutral to reduce greenhouse gas emission to net zero based on the medium-long term environmental adaption plan under the revised ICE ACT, special depreciation of 50% or tax credit of 5% of the acquisition cost will be available for the investment of equipment which leads to the elimination of carbon dioxide.
・ New tax incentive for promoting M&A with the transfer of own shares
Regarding M & A using own shares, in cases where shareholders (companies or individuals) of a target company transfer their own shares and receive shares of the acquiring parent company instead pursuant to the share issuance regime under the Companies Act, the recognition of capital gains or losses derived from the relevant share transfer will be deferred.
・ Revision of wage increases and investment taxation
Regarding the wage increases and investment taxation for small-medium sized companies, the increased ratio of wages will be judged by the amount of wages of all workers (previously judged by the amount of wages for continued workers for the preceding two years), and the rule will be extended for two years.
3. Conclusion
In this News, we mentioned “2021 Tax Reform Outline -Corporate Taxation-.”
Please note that this News only introduces general outlines and does not include professional advice. So please make sure not to make any decisions without taking professional advice individually. If you have any questions, please feel free to contact us.
(Reference)
2021 Japan Tax Reform Outline
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